Auto Liquidation

Deribit is operating with an incremental auto-liquidation system. This means that as soon as an account does not have enough equity to maintain its positions, (as assessed by the risk engine) a small part of the position will be closed in the market at market prices. At this moment the standard size for liquidations is 10 future contracts (total $100 notional value) and 1 option contract. This happens in real time at a speed of 25 rounds per second, such that the maintenance margin of an account can only be higher than the equity of an account for a fraction of a second. (provided there is a liquid market that makes it possible to liquidate at all). So in a very worst case, a position could theoretically liquidate at a speed of 250 contracts per second ($2500/second). As soon as maintenance margin is again lower than equity, liquidation will stop.

The system would first liquidate future positions and after that liquidate any option positions, in such a way that the risk of the position will be reduced. (basically striving for a “delta neutral” position).